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Water and
Wastewater
Pricing
An Informational Overview
U.S. Environmental Protection Agency
Office of Wastewater Management
EPA 832-F-03-027
I.
II.
III.
Affordability ............................................................................................................................... 6
Revenue Stability ........................................................................................................................ 6
Effectiveness ............................................................................................................................... 7
V.
VI.
I.
II.
Revenue Stability
In the small body of literature on water
pricing, revenue instability is the most
frequently cited problem with various forms
of conservation rates (Beecher 1994). This is
because conservation rates can shift cost
recovery from fixed charges to variable
charges (rates based on use). Utilities also
worry that price increases might reduce their
sales in an unpredictable manner, leading to
less certain revenue streams. If consumers
respond with a higher-than-expected
6
V.
Show-Me Ratemaker
The state of Missouris Department of
Natural Resources offers free software that
can be downloaded from its Web site at
http://www.dnr.state.mo.us/oac/lgov.htm#rat
e%20studies%20for%20water%20and%20s
ewer. Show-Me Ratemaker can be run on
Microsoft Excel, providing users with 5-year
financial projections and analyses of
different rates.
Effectiveness
The literature on conservation pricing for
water is small but growing. University of
Georgia Professor Jeffrey L. Jordan provides
some insight in a 1994 article in the Water
Resources Bulletin. In 1991 Spalding
County, Georgia (part of the Atlanta metro
area), transitioned from a decreasing rate
structure to an increasing rate structure.
EPA Reports
EPAs Office of Water has issued two
reports aimed specifically at the water and
wastewater pricing issue. The first report,
AWWA Manuals
The American Water Works Association
(AWWA) and the AWWA Research
Foundation have multiple publications of
interest. AWWA has periodically published
a definitive manual on pricing; the most
recent is Principles of Water Rates, Fees,
and Charges (AWWA 2000). Additional
documents relevant to rate design can be
found at http://www.awwa.org/ and
http://www.awwarf.com/.
U.S. Environmental Protection Agency, Office of Water. 1990. National Wastewater User Fee
Study of the Construction Grants Program. EPA 430/09-90-011. U.S. Environmental Protection
Agency, Office of Water, Washington, DC.
U.S. Environmental Protection Agency, Office of Water. 1989. Building Support For Increasing
User Fees. EPA 430/09-89-006. U.S. Environmental Protection Agency, Office of Water,
Washington DC. http://www.epa.gov/clariton/clhtml/pubtitle.html
Government Finance Research Center. 1987. Proceedings of Financing for the Next Generation:
A National Conference on Innovations in Financing Wastewater Treatment. Government
Finance Officers Association, Washington, DC.
Jordon, J. L. and R. Albani. 1999. Using Conservation Rate Structures. Journal AWWA, 91:8.
Jordan, J. L. 1995. Incorporating Externalities in Conservation Programs. Journal AWWA, 86:6.
Jordan, J. L. 1994. The Effectiveness of Pricing as a Stand-Alone Water Conservation Program.
Water Resources Bulletin, American Water Resources Association, 30:5.
Mitchell, D.M. and W.M. Hanemann. 1994. Setting Urban Water Rates for Efficiency and
Conservation. Report to California Urban Water Conservation Council, Sacramento, CA.
Raftelis Environmental Consulting Group, Inc. 2000. Raftelis Environmental Consulting Group
2000 Water and Wastewater Rate Survey. Raftelis Environmental Consulting Group, Inc.,
Charlotte, NC. http://www.raftelis.com/
Raftelis, G. A. 1989. Water and Wastewater Finance and Pricing, 2nd ed. Lewis Publishers,
Boca Raton, FL.
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